Millennials have found a way to buy houses: Living with mom and dad

At 26, Brandon Paulin couldn't believe he was still living with his parents.

Already the mayor of his hometown in Indian Head, Md., Paulin still slept in his childhood room. He watched friends he grew up with move into their own apartments after finishing college - and he longed for similar self-sufficiency with his fiancé, Taryn, who lived 30 minutes away and was also living at home to save money.

But it also meant he'd never paid a dime in rent, offsetting the awkwardness of being an adult under his parents' roof. It paid off in June 2022, when he and his now-wife finally had enough saved for a down payment on a two-bedroom house with a nice yard for their beagles, Bella and Lilo.

"It wasn't the conventional way to buy a house," Paulin said. "But it's what worked for us."

The strategy has gained traction among young adults trying to bridge the gap between sky-high rents and a daunting real estate market. In 2022, the share of first-time buyers who moved directly from a friend's or family member's home and into their own hit 27 percent, according to the National Association of Realtors. That's the highest share since the group started keeping track in 1989. Though that number trended lower this year to 23 percent, it remains elevated, said Jessica Lautz, deputy chief economist and vice president of research at NAR.

For swaths of millennials, hunkering down with family gave them breathing room to save for a home. The trade-off comes down to temporarily relinquishing a measure of independence to achieve a milestone increasingly out of reach for people their age.

Lautz said this generation faces a host of obstacles - student loan debt, car payments and child-care costs, among them - but none loom larger than record-high rental prices. As of November, the national median for a one-bedroom apartment was roughly $1,500 a month, according to Zumper. But it's significantly higher in large urban areas that are a beacon to young professionals, including New York ($4,300); San Francisco ($2,970); Miami ($2,600); and D.C. ($2,330).

"The cost of renting a place is very prohibitive for young adults," Lautz said. "And they may have decided during a pandemic: Why should I rent? Why don't I just live at home?"

At the same time, they face a bruising real estate market characterized by elevated listing prices and interest rates - and they're growing increasingly hopeless and frustrated. Last year, the median age for a first-time home buyer climbed to 36, according to NAR, compared with 29 for their parents' generation. Meanwhile, home prices remain near their record highs of the pandemic. The U.S. median is around $420,000 - with prices far higher in the West, over $600,000, and around $430,000 in the Northeast, according to Federal Reserve data.

Interest rates on a 30-year fixed-rate mortgage recently dipped below 7 percent for the first time in months. Borrowing costs are more than double what they were early last year.

Inventories - particularly the number of starter homes - remain at record lows; younger buyers also are being outbid by baby boomers swooping in with all-cash offers. There were fewer existing-home sales in October than any month since 2013, according to NAR data, and 2023 is on track for the fewest existing-home sales of any year since 2011.

"Given the collapse in housing affordability, it's not surprising that young people would stay in their parents' homes longer to manage their expenses, to save on rent and save for a down payment so they could purchase a home," said Mark Zandi, chief economist at Moody's Analytics.

Zandi said he wouldn't be surprised if the trend continued. The supply shortage - particularly for starter homes - could get "increasingly more difficult," he said.

He pointed to 2023 Census data that showed 20 percent of men between the ages of 25 and 34 lived with their parents - a number that has steadily ticked upward since the 1980s. For women that age, it was 12 percent, also a steady increase over the past five decades. While those numbers are growing in the United States, they still lag far behind countries like Malta, where 70 percent of adults younger than 35 lived at home with their parents in 2022, according to data from Eurostat.

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Trade-offs

Paulin, who is on his third term as mayor of Indian Head, said he shared a basement unit with his younger brother, who kept him awake at night chatting with his friends while playing "Fortnite."

It was annoying, Paulin said, but the living arrangement allowed him to save much of his income, and he was relieved to buy his house last summer for around $350,000 at a rate of 6 percent. "It didn't look like we were going to get a whole lot more," he said. "And we were afraid that if we kept waiting, then interest rates would continue to climb."

Alex Mourousias, a 33-year-old software engineer in Chicago, was reluctant to move back in with his father because he had been living on his own for years. But it was mid-2020, and the coronavirus pandemic had shut people indoors. Mourousias's father had a pitch: He wouldn't charge his son rent, and it would be an opportunity for him to save enough for a down payment.

Mourousias was sold. He lived with his father for six months. And when his dad moved in with his new wife after selling his home, Mourousias moved in with his mother. It wasn't so bad, Mourousias said: Her house was large enough that they didn't get in each other's way, and they'd often get together in the evenings to watch the reality show "90 Day Fiancé." By the time lockdowns began lifting in mid-2021, Mourousias had enough for a down payment. In July 2021, he purchased a condo in Chicago's West Loop neighborhood for $386,000, with a 3 percent interest rate.

"It was a huge gift that they gave to me," he said. Forfeiting the freedom of living alone "was a very fair price to pay for what I got out of it."

The rush of millennials leveraging free or discounted rent with their relatives coincides with the increasing prevalence of multigenerational households. The number of Americans who live in multigenerational households has quadrupled since the 1970s, according to Pew Research Center's analysis of census data.

Pew partly attributes the rise to broader trends in population growth, including increasing numbers of Asian, Black and Hispanic families, who live in multigenerational households at higher rates than their White counterparts. About one-third of U.S. adults said caring for a family member was a major reason for their arrangement, while 4 in 10 cited financial issues, according to the study. Those living in multigenerational households were less likely to live in poverty, Pew researchers found, and that was especially true of the most economically vulnerable groups such as Black and Hispanic residents.

The rising costs of homeownership have been especially impactful on Black and Latino home buyers, who have applied for mortgages at declining rates since the start of the pandemic, said Josè Loya, an assistant professor at UCLA who researches housing inequality. Such groups are disproportionately affected by rising home prices because they tend to have lower incomes, he said.

"They're getting squeezed out," Loya said.

Millennials who move into family homes located in hot housing markets are often still priced out of their own neighborhood. That happened to Jackson Cowart and wife, Emma, who moved in with Cowart's mom in her Seattle suburbs house for seven months to help her with a medical issue.

Even with a combined annual income of around $200,000, they knew they'd be pushed out altogether of the Seattle real estate market - where the median listing price hovers near $840,000, according to Redfin. Cowart said he and his wife constantly searched for homes online in the months they stayed at his mom's house. They eventually settled on a two-bedroom home 70 miles west of Seattle, nestled in the woods at the base of Olympic National Park.